Gateway vs. Special Gateway Minimum Requirement

[ERISA1]

Hi - I believe there is a difference between the conditions one can impose to receive a Gateway minimum in a standalone DC Plan versus conditions for Special Gateway (in combo DB/DC Plans). I believe the Special Gateway is more liberal because you cannot condition entitlement on whether or not an NHCE is "Benefitting" (within the meaning of 1.410(b)-3).

If my impression is correct, there may be a need for different language in standalone DC's versus DC's that are part of a combo.

I have attached a memo outlining the issues. I will greatly appreciate any feedback.

Thanks.

Q re Gateway Minimums in standalone DC plans versus DB-DC combos.pdf

[Tom Poje]

well, those particular nondiscrim regs came out way back in 2001 and in all that time I've never seen anyone suggest that idea, nor have I heard the IRS say or imply that current document providers have it 'messed up' and they need to provide other special language. The preamble to those regs simply says that if an NHCE benefits under both plans you can aggregate the 2 to determine if they satisfy the gateway (p11 of the pdf)

In fact, if you read the regs themselves, there is nothing in them that says an NHCE must be 'benefiting'.

1.401(a)(4)-8(b)(1)(vi) says "each NHCE must receive an allocation rate of at least 5%..."

but the preamble explained that as someone who actually benefits. (page 7 of the pdf)

nondiscrim regs.pdf

[ERISA1]

Others read the preambles differently. For example, Sal Tripodi's EOB, Chapter 9, Section IV, Part B, item 4a cites Treas. Reg. section 1.401(a)(4)-8(b)(1)(iv)(B) which requires Gateway only for those who Benefit.

This exception doesn't fit in many cases because everyone must get an allocation in Top Heavy or Safe harbor non-elective contributions plans. However, non Top Heavy plans offer opportunities.

The issue becomes more complicated when there's a combination DC/DB, because the term "benefitting" only applies to DC plans. In combos, the Special Gateway rules (under the -9 regulations) apply. While the terminology is different, I believe the concepts are the same. That is, a participant is counted as covered under a DB plan if she "accrues a benefit". The difference between (a) benefitting from an allocation under a DC plan, and (b) accruing a benefit under a DB plan is semantic only. Therefore, it seems the same exception should apply under the Special Gateway requirement. That is, if a participant does not accrue a benefit under either plan they should not be required to get a Special Gateway minimum.

Thanks for any feedback.

[Tom Poje]

Sal and I are saying the same thing, in fact in 4.a.5 of his book (2012 edition) he even notes it is the preamble that says a person needs to receive a nonelective contribution to be considered for the gateway. Why they put it in the preamble rather than the regs (or didn't change the regs to clarify things is beyond me) But even the preamble's wording implies people looking just at he regs questioned whether a gateway had to be provided to those who received no nonelective.

I still don't see anywhere that implies if a person receives nothing in the DB and they receive no nonelective in the DC they should still receive the special gateway.

[Mike Preston]

That is, if a participant does not accrue a benefit under either plan they should be required to get a Special Gateway minimum.

Did you mean to say they should *NOT*?

[ERISA1]

Thanks Mike for noticing the critical omission of the word NOT. I have edited my June 8th post by inserting NOT in the last sentence of my third paragraph.

[ERISA1]

Thanks Tom. I am seeing a consensus forming (on BenefitsLink and outside) that the Special Gateway ought not be required if a participant does not receive a benefit in either plan. If anyone has heard differently, I will appreciate it if you will add a reply to this topic.

[Tom Poje]

ah, what can happen by omitting the word 'not', changes the whole context of your question.

one of the most famous:

Is There A Bible That Says Thou Shalt Commit Adultery?

“I once read that long ago an English Bible was published having the Commandment saying, “Thou shalt commit adultery” instead of saying “Thou shalt not commit adultery”. Do you know in which Bible this was and in what year that Bible was published? I also read that the publishers only learned of the error after a great number of Bibles had already been distributed. After having distributed that many Bibles, how could the publishers have remedied it? You know the old saying about, “once the toothpaste is out of the tube…” ‘The typographical error’

The Bible you are referring to is known as “The Wicked Bible” or “The Sinners Bible.” It was a 1631 reprinting of the Authorized King James Bible first printed in 1611. The Bible was printed by the Kings Printing House under the direction of Head Printer Robert Barker. Once the mistake was found, the 1000 Bibles in that print run were collected and burned. Eleven survived. One can be seen in The Living Word National Bible museum in Branson, MO, USA. Robert Barker and a man named Lucas were fined a total of £300. Lucas just happened to be in the wrong place at the wrong time as he was acting as executor for the estate of a man who had invested in the printing. You can see one for sale for$89,500 along with a photocopy of the famous error here. (You’ll need to scroll down to see it.) Reference:

http://en.wikipedia.org/wiki/The_Wicked_Bible -

See more at: http://amazingbibletimeline.com/bible_questions/q21_shalt_commit_adultery/#sthash.Z2utRj17.dpuf

........

and that is your strange and unusual history lesson for today that you might not have known!

[AndyH]

There's an "outside"?